TRI-CITY LOOKING TO SAVE BIG MONEY

Credit restructure part of finance plans

Oceanside 
Tri-City Healthcare trustees last week approved deals that could save the public health district millions of dollars in coming years.

The board voted 5-2 to allow district administrators to negotiate better terms for lines of credit and to purchase a Carlsbad wellness center it now leases.

The purchase will ultimately cost the district millions more than the value of the property, but much less than if the district continued to lease it for the remainder of the 25-year agreement, which Tri-City officials say they’re locked into.

Tri-City has paid $5 million for an option to purchase the fitness center and medical offices in Carlsbad. The Tri-City Wellness Center, on El Camino Real, is geared toward serving as a fitness center for baby boomers and reaching Carlsbad residents who could just as easily seek medical services at Scripps Memorial Hospital-Encinitas as at Tri-City Medical Center in Oceanside.

Including interest, the health care district expects to pay $62 million over about 25 years to purchase the Wellness Center. If Tri-City continued to lease the building, it would be on the books as costing about $103 million for the remainder of the 25- year lease, entered into just before Chief Executive Larry Anderson arrived in January 2009.

Though the circumstances are not ideal because the district will likely pay more than the property is worth, Tri-City officials are happy to save tens of millions it would otherwise be required to pay.

The district is in a much better financial situation than when the deal was worked out, administrators say. The health care district has been profitable for 17 consecutive months, Anderson said.

The deals are possible now because the health care district can secure loans more easily and with better interest rates, said Chief Financial Officer Alex Yu.

District officials plan to work with BBVA Compass or Bank of the West for financing.

Included in those financing deals is a revolving line of credit, financing available to Tri-City much like a credit limit on a credit card, that would allow the health care district to borrow tens of millions. The district can now borrow up to $20 million from lender Capital Source at an interest rate of about 6.5 percent, but is required to carry at least a $5 million balance. Tri-City expects to get a revolving line of credit with Bank of the West for $25 million at an interest rate of 3.3 percent or a revolving line of credit for $30 million from BBVA Compass at an interest rate of 2.05 percent. Neither of the latter two options has a required minimum balance.

With those and other deals, the district expects to have significantly more available cash, which officials hope will help in acquiring $500 million in financing to expand Tri-City Medical Center with, among other additions, a seven-story tower with 216 rooms.